Annualized inflation eased to a 2.3 percent pace, the lowest since early 2021. But the month-to-month pace of inflation increased.

Inflation was relatively flat as President Donald Trump's sweeping tariffs went into effect in April, with lower grocery prices helping keep overall costs in check. Monthly inflation increased just 0.

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Chicago Fed chief Austan Goolsbee called the April inflation report 'comforting' but said he needs to see several more as officials consider rate cuts

Investors are betting that the Federal Reserve is likely to keep interest rates on hold in the near term following another inflation reading that didn’t make things any easier for the central bank.

Tariffs hadn't raised the cost of living as of March, according to Wednesday's report on the Federal Reserve's preferred measure of inflation.

"The decline was largely driven by consumers' expectations. The three expectation components—business conditions, employment prospects, and future income—all deteriorated sharply, reflecting pervasive pessimism about the future,” said Stephanie Guichard, senior economist, Global Indicators at The Conference Board.